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DATE
Tuesday, August 5, 2025 at 2:00 p.m. ET
CALL PARTICIPANTS
Chairman and Chief Executive Officer — Tracy Krohn
Executive Vice President and Chief Operating Officer — William Williford
Executive Vice President and Chief Financial Officer — Sameer Parasnis
Vice President and Chief Accounting Officer — Trey Hartmann
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TAKEAWAYS
Production-- Production increased 10% sequentially to 33,500 barrels of oil equivalent per day in Q2 2025, within company guidance.
Adjusted EBITDA-- Adjusted EBITDA grew by 9% to $35 million compared to the prior period in 2025.
Lease Operating Expenses (LOE)-- Lease operating expenses totaled $77 million for Q2 2025.
Unrestricted Cash-- Unrestricted cash surpassed $120 million at the end of Q2 2025.
Net Debt-- Net debt declined to $229 million at the end of 2025, down from $284 million at year-end 2024.
Liquidity-- Liquidity increased to $171 million as of June 30, 2025.
Dividend-- Paid seven quarterly cash dividends since late 2023 and announced the Q3 2025 payment scheduled for later in August.
Debt Refinancing-- Closed $350 million in new second lien notes in January 2025, lowering the interest rate by 100 basis points in January 2025.
Hedging-- Hedged 2,000 barrels per day of oil at $63 per barrel with a $77.25 per barrel ceiling in 2025; secured gas costless collars on over 7 million cubic feet per day for July–December 2025.
Asset Sale and Settlement-- Sold a non-core Garden Banks interest (about 200 barrels of oil equivalent per day) for $12 million and received a $58 million insurance settlement for Mobile Bay 78-1.
Reserves-- SEC proved reserves totaled 123 million barrels of oil equivalent at midyear 2025, down from 127 million at year-end 2024, with production of 5.8 million barrels of oil equivalent in 2025 partially offset by 1.8 million barrels of net positive revisions at midyear 2025.
PV-10-- Midyear 2025 proved reserves valued at $1.2 billion pretax PV-10 (SEC pricing), unchanged from year-end 2024.
Reserves Mix-- At midyear 2025, SEC proved reserves consisted of 44% liquids (34% crude oil, 10% NGLs) and 56% natural gas.
Production Ramp-- The West Delta 73 and Main Pass 108/98 fields restarted in late March and early April with ongoing ramp-up projected to increase second-half 2025 production.
Midyear Reserve and Operations Attribution-- Net positive reserve revisions of 1.8 million barrels were attributed to better performance in Cox-acquired and legacy assets, as well as optimization projects at Mobile Bay at midyear 2025.
Capital Spending-- $19 million in capital expenditures and $16 million in asset retirement costs for 2025 to date, primarily targeting accretive, low-risk producing property acquisitions.
Guidance-- Q3 2025 production midpoint forecast at 35,000 barrels of oil equivalent per day, driven by new fields and successful workover program.
Temporary Production Impact-- Mobile Bay production was shut-in during Q2 due to a pipeline issue, reducing production by approximately 1,000 barrels of oil equivalent per day before resolution at quarter-end.
Surety and Legal Developments-- Settlement with largest surety providers resulted in lawsuit dismissal and locked in prior premium rates through 2026; the court also denied two other sureties' motions in June 2025 for over $100 million in preliminary cash collateral, benefiting liquidity and operational certainty.
Credit Rating-- Credit ratings were improved by S&P and Moody’s following balance sheet transactions in Q1 2025.
SUMMARY
Management highlighted significant cash generation and enhanced liquidity through asset sales and insurance settlements during Q2 2025. Major refinancing initiatives reduced both interest burden and overall debt levels, supporting improved credit ratings without new equity issuance. The company reported a stable SEC proved reserve value (pretax PV-10 of $1.2 billion) at midyear 2025 compared with year-end 2024, despite substantial production, noting that positive reserve revisions were achieved with no new drilling activity in the midyear 2025 reserve report. Ongoing regulatory clarity and recent legal victories regarding surety issues eliminated the risk of immediate, large collateral demands and improved the company’s flexibility for acquisitions. Physical production was below potential during the quarter because of a resolved pipeline issue, but near-term guidance anticipates further increases as newly acquired assets ramp up output, with production expected to increase in Q3 2025.
Krohn stated, "We operate about 94% of our midyear proved reserves," emphasizing control over capital allocation and operational timing.
The reserve mix for midyear 2025 SEC proved reserves was 56% natural gas and 44% liquids, supporting management’s belief that proximity to LNG infrastructure offers strategic value in the current market context.
The midyear 2025 reserve report used a lower average SEC twelve-month crude oil price ($71.22 per barrel) compared to the year-end 2024 report ($76.32 per barrel), yet pretax PV-10 remained flat at $1.2 billion at midyear 2025, reflecting asset quality and operational leverage.
Legal settlements with surety providers resulted in the termination of previously filed litigation in June 2025 and locked in historical premium rates, which alleviated market uncertainty around collateral constraints.
Management reaffirmed a focus on "accretive low-risk acquisitions of producing properties" signaling no planned capital allocation to drilling under current commodity price conditions.
Recent improvements to production infrastructure at acquired Cox assets required immediate spending but are expected to enhance long-term value and operational safety.
INDUSTRY GLOSSARY
PV-10: Present value of estimated future oil and gas revenues, net of direct expenses and discounted at 10% per year (pretax), using SEC price assumptions; represents a standard industry measure of asset base value.
Lease Operating Expenses (LOE): Ongoing costs incurred to operate and maintain oil and gas production assets, excluding depreciation and amortization.
Costless Collar: A hedging instrument combining purchased puts and sold calls that provides a price floor and ceiling on commodity sales with minimal upfront cost.
Barrel of Oil Equivalent (BOE): A standardized measure of energy that combines oil, condensate, NGL, and natural gas production by converting gas to oil-equivalent volumes.
Full Conference Call Transcript
Tracy Krohn: Thanks, Al. Good morning, everyone, and welcome to our second quarter conference call for 2025. With me today are William Williford, our Executive Vice President and Chief Operating Officer, Sameer Parasnis, our Executive Vice President and Chief Financial Officer, and Trey Hartmann, our Vice President and Chief Accounting Officer. They're all available to answer questions later during the call. So before we discuss the second quarter results, I would like to say how proud I am of all the people who've helped make W&T Offshore, Inc. a success. Since we founded the company in 1983, we've been an active operator in the Gulf of Mexico, a staunch advocate for the offshore industry for over forty years.
Yesterday, I was honored to celebrate the twentieth anniversary of W&T Offshore, Inc. going public by ringing the closing bell at the New York Stock Exchange. We're conducting today's earnings call from the New York Stock Exchange where I have several things to discuss about the company. As you will hear throughout the call today, we're continuing to enhance shareholder value through operational excellence and an impressive portfolio of assets. Across 2025, we've delivered strong operational and financial results. Quite simply, we're executing on our proven and successful strategy that's committed to profitability, operational execution, returning value to our stockholders, and ensuring the safety of our employees and contractors.
Our ability to deliver production growth while seamlessly integrating accretive producing property acquisitions has helped W&T Offshore, Inc. grow during our forty-year history. Some of our second quarter highlights include we increased production by 10% quarter over quarter to 33,500 barrels of oil equivalent per day, which is within our guidance range. We also performed nine low-cost, low-risk workovers that exceeded expectations and positively impacted production revenue for the quarter. I'd like to point out that five of the workovers were performed in Mobile Bay, helping to increase production at this low decline, long-life asset, which is also our largest natural gas field in the Gulf of Mexico. Total lease operating expenses were $77 million, again within guidance.
We grew adjusted EBITDA by 9% to $35 million compared to 2025. We've also grown our unrestricted cash to over $120 million while lowering our net debt. Our 2025 midyear reserve report from Netherland Sewell and Associates showed net positive revisions, which continues to demonstrate the strength of our asset base and our ability to maximize value from our fields. None of this includes any drilling activity. We have returned value to our shareholders through our quarterly dividend. We paid seven quarterly cash dividends since initiating the dividend policy in late 2023 and announced the third quarter 2025 payment that will occur later this month.
Additionally, in the first quarter of this year, we had several transactions that strengthened and simplified our balance sheet, adding material cash to the bottom line and improving our credit ratings from S&P and Moody's. In January, we successfully closed a $350 million offer of new second lien notes that decreased our interest rate by 100 basis points. Together with other transactions, this reduced our total debt by $39 million. We also entered into a new credit agreement for a $50 million revolving credit facility, which matures in July 2028. This is undrawn and replaces the previous $50 million credit facility provided by Calculus Lending.
We also sold a non-core interest at Garden Banks, which included about 200 barrels of oil equivalent per day for $12 million, and we received $58 million in cash for an insurance settlement related to the Mobile Bay 78-1 well. All of these actions have allowed us to enhance liquidity and improve our financial flexibility. Lastly, in 2025, we've opportunistically taken advantage of commodity price volatility to increase our hedge position, including 2,000 barrels per day of oil at $63 per barrel and a ceiling price of $77.25 per barrel. For natural gas, we have costless collars of over 7 million cubic feet per day from July to December 2025.
This has helped lock in a very favorable price range for a portion of our oil and natural gas for the remainder of 2025. Our ability to execute our strategy has delivered very positive results thus far in 2025, including an improved balance sheet, enhanced liquidity, growing production, and EBITDA, all of which have positioned us for success in 2025 and beyond. At year-end 2024, the company had total debt of $393 million and net debt of $284 million. At the end of 2025, our total debt and net debt were significantly reduced to $350 million and $229 million, respectively. Our liquidity at 06/30/2025 increased to $171 million.
CapEx in 2025 was $10 million, and asset retirement settlement costs totaled $12 million. For 2025, our CapEx has totaled $19 million, and asset retirement costs were $16 million. We continue to expect our full-year capital expenditures to remain focused on accretive low-risk acquisitions of producing properties rather than high-risk drilling in the current uncertain commodity price environment. This strategy is aimed at generating free cash flow, providing a solid base of proved reserves with upside potential, and offering the ability for our experienced team to reduce costs. Over the years, we've consistently created significant value by methodically integrating producing property acquisitions.
The assets we acquired last year added meaningful reserves at an attractive price, and we are now seeing additional production from two fields that were previously shut in. The West Delta 73 and Main Pass 108/98 fields were placed into production towards the end of March and into early April. The fields began ramping up production over the course of 2025, and we expect production to continue to increase in the second half of this year from these fields. That will be seen in our third quarter guidance as well. There was a temporary shut-in of production in Mobile Bay during the second quarter due to a pipeline issue that was resolved by June 30.
That reduced second-quarter production by about 1,000 barrels of oil equivalent per day. Yesterday, we provided our detailed guidance for the third quarter of 2025 and reiterated our full-year guidance. In 2025, with new fields continuing to ramp up, coupled with the strong workover and recompletion program performance, we are predicting the midpoint of Q3 2025 production to be around 35,000 barrels of oil equivalent per day. This is an increase of almost 5% compared to 2025. This is quite remarkable considering we currently do not have any drilling operations. Thus, we are spending minimal capital, and our LOE costs are remaining flat.
The third-quarter guidance for our cash operating costs, which includes LOE, gathering, transportation, production cash taxes, and cash G&A costs, is in line with 2025. With absolute costs remaining flat and production expected to increase, we believe that on a per BOE basis, we will see decreases. We also believe that there are more opportunities to reduce our operating costs and find synergies to drive costs lower in the long term. We're always working hard to reduce costs without impacting safety or deferring asset integrity work. I'd now like to talk to you about our midyear 2025 reserve report.
In our release yesterday, we reported SEC proved reserves of 123 million barrels of oil equivalent, which was slightly lower than the 127 million barrels equivalent at year-end 2024. This reduction was primarily driven by production of 5.8 million barrels of oil equivalent in 2025. It was partially offset by 1.8 million barrels of net positive revisions. We're pleased with another report that has positive revisions despite drilling no new wells and spending minimal capital in 2025. This highlights the strength of our prolific asset base and our operational capabilities to economically extract reserves from long-life assets.
We operate about 94% of our midyear proved reserves, which gives us maximum flexibility in controlling our operations during periods of volatile commodity prices. Approximately 44% of midyear 2025 SEC proved reserves were liquids, with 34% crude oil and 10% NGLs, and we had 56% natural gas. With the continued strength in natural gas pricing and the recent European LNG deals, we believe having a strong natural gas position located in close proximity to LNG facilities will position W&T Offshore, Inc. very well in the future. We have long enjoyed a premium over Henry Hub pricing and see that continuing in the future with the increased demand in our operating region.
The pretax PV-10 of the midyear 2025 proved reserves using SEC pricing was flat at $1.2 billion compared with year-end 2024. Midyear 2025 proved reserves and PV-10 were based on average SEC twelve-month crude oil and natural gas prices of $71.22 per barrel and $2.86 per MMBtu, while year-end 2024 prices were $76.32 per barrel of oil and $2.13 per MMBtu of natural gas. We believe we've built a sustainable group of high-performing Gulf of Mexico assets that will continue to provide meaningful cash flow to our shareholders for many years. Before closing, I'd like to address surety and regulatory updates.
In June 2025, we were pleased with the settlement agreement that we reached with two of our largest surety providers, which called for the dismissal of a previously filed lawsuit. This outcome is very positive for W&T Offshore, Inc. overall, as we will not acquiesce to unjustified collateral demands made by the applicable surety. We've locked in our historical premium rates through 2026. We believe the entry into this settlement agreement vindicates our resolve to stand up to our surety provider's unjustified demands on independent oil and gas operators such as W&T Offshore, Inc. Additionally, in June 2025, U.S. Magistrate Judge G.
Dina Palermo recommended denying two other surety companies' motions for a preliminary injunction, through which they were collectively asking for full cash collateralization of over $100 million. We couldn't be more pleased with the court's decision to prevent unnecessary and unjustified collateral demands by surety providers. W&T Offshore, Inc. has met its plugging and abandonment obligations, paid its negotiated premiums, and operated responsibly in the Gulf of Mexico. In fact, we've done more plug and abandonment work than anybody in the Gulf of Mexico.
We demand fairness and transparency for all oil and natural gas producers in the Gulf of Mexico and will continue to pursue the pending litigation against our other surety providers that have decided not to deal fairly with W&T Offshore, Inc. and other independent oil and gas operators. We have done well over a billion dollars of decommissioning work in the Gulf of Mexico, again, more than any other operator, and we've done so safely and reliably. These are very positive results for W&T Offshore, Inc. and should alleviate some of the uncertainty that has negatively impacted our stock price despite some positive operational and financial results in 2025.
As we've mentioned during our last call, in early 2025, pursuant to directives from the Trump administration, the Department of Interior indicated it will not seek supplemental financial assurance in the Gulf of Mexico except in the case of sole liability properties and certain non-sole liability properties that do not have a financially strong co-owner or predecessor entitled. Since his inauguration, President Trump has issued a number of executive orders aimed at streamlining regulations and reducing the regulatory burden on oil and natural gas companies, increasing federal oil and natural gas leasing, including the Gulf of Mexico, and expediting U.S. natural resource development. We're very pleased with these actions.
We expect these will positively impact W&T Offshore, Inc. and the offshore energy industry. In closing, I'd like to again thank our team at W&T Offshore, Inc. for twenty years as an NYSE-listed company. As the largest shareholder, I believe we are well-positioned to continue to grow and add value in 2025. We generated solid EBITDA and raised our cash position to over $120 million. This allows us to continue to evaluate growth opportunities both organically and inorganically. We have a long track record of successfully integrating assets into our portfolio, and we continue to believe that the Gulf of Mexico is a world-class basin that supports value creation.
We will maintain our focus on operational excellence and maximizing the cash flow potential for our asset base. With that, operator, we can now open the lines for questions.
Operator: Thank you. We'll now begin the question and answer session. Our first question is from Nate Pendleton with Technip Capital. Please go ahead.
Nate Pendleton: Good morning. So my first question, I wanted to start on policy.
Tracy Krohn: With the administration looking for ways to support the industry further, can you share your thoughts on what actions the administration may be looking at in order to incentivize production in the Gulf of Mexico?
Tracy Krohn: Thanks, Nate. Good morning. Yes, there's a lot of things that the Department of Interior is looking at. They've already weighed in with regard to global royalties, and I expect and I hope that they will weigh in on further reductions on those royalties. There's the so-called idle iron act, which is kind of nonsensical to me and our company. Why do you need to prematurely abandon these wells when none of the rest of the wells on the platform have been abandoned? This was a policy brought on by the Obama administration to create havoc and essentially make it cost more deliberately.
The idea was, of course, to get rid of oil and gas companies in the Gulf of Mexico. We've looked at some other things that we discussed with them. I think it's important to recognize that this administration has taken a very strong position in the fact that, yes, we want to maximize and utilize our abilities to conserve the natural resource in the Gulf of Mexico. President Trump and the DOI have made that pledge that they're going to do. We're already seeing some of the regulations getting rolled back. There will hopefully be another decision with regard to surety here put solidly in writing, and we're looking forward to that.
Of course, you're aware that we're suing surety providers. Those are just a few. We're very hopeful that this administration gets back to the idea that oil and gas from this very important basin, by the way, the second largest producing basin and the largest by area in the United States.
Nate Pendleton: Thanks, Tracy. That's really encouraging. Shifting over to your operations, implied 4Q production guidance seems very strong at the midpoint. In your prepared remarks, you talked about the increase you expected in Q3. Can you share maybe what's driving that further production ramp that you're expecting at the back half of the year?
Tracy Krohn: Yes, I'm going to turn that over to our Chief Operating Officer, William Williford. He's got responsibility for that, Nate.
William Williford: Good morning, Nate. As Tracy mentioned in the call this morning, we have a lot of low-cost workovers that we're continually doing in the third quarter, as well as a couple of recompletions to add to that production. We also plan on ramping up one of the Cox fields we acquired last year as well to see significant production through the last part of the year.
Nate Pendleton: Got it. Thanks, Nate.
Operator: The next question is from Jeff Robertson with Water Tower Research. Please go ahead.
Jeff Robertson: Thank you. Good morning. Tracy, does the resolution of some of the surety and bonding issues for W&T Offshore, Inc. have an impact on how you approach acquisitions? And then secondly, do they have an impact anywhere on the balance sheet with respect to liquidity?
Tracy Krohn: Absolutely, Jeff. I mean, sureties were in collusion with one another to artificially suppress the company by virtue of demanding full collateral. It's kind of like your car insurance. If you have a car, your agent calls you up and says, "Gee, Jeff, you have a $50,000 insurance policy on your car. Would you please send me $15,000? In fact, I demand that you send me $50,000 so we can cash collateralize your account. And by the way, we're going to increase your premiums as a result." That was the alternative that was given to us, except it was a lot bigger nominal dollars.
For us, it's around $250 million of collateral demands, and we had to sign this indemnity agreement with these companies. They all read virtually identically, that you had to provide cash demand within a very short period of time, maybe ten days to two weeks, and that if you didn't do so, you were in violation of their policy. Well, several of them got together, and they all called in about the same time for $250 million, which, by the way, just happened to be the market cap of the company at the time. I thought that was pretty unfair. Obviously, they're all doing it at the same time. It seemed collusional to me, so we sued them.
And as a result, it threw the surety market into quite a bit of disarray. The very idea that you need surety is kind of preposterous to us. The government, in spite of all the bankruptcies that have taken place in the Gulf of Mexico, has never ever called a bond. Even though they demand it, they demand that surety, but they've never called it. Well, the reason that they've never called it is because the lease form itself calls for joint and several liability. That means that anybody who ever held a record title interest is jointly and severally liable up to 100% of the obligations. So the government never had that situation.
They would just go back to the and demand that they take care of those obligations. We've had to do that ourselves. Others have had to do that. It's always been the case. That is what the lease form says. So the government's idea that we need more surety is obviously preposterous because they've never called one single damn surety demand. Not once. So it's got to be a farce. It was put in by the Obama administration, further exasperated by the Biden administration. It was wholly designed to put oil and gas companies out of business.
Jeff Robertson: Tracy, do you think that resolving those issues will have an impact on M&A activity in the Gulf?
Tracy Krohn: Oh, you bet. Yeah. They will have to figure out a different way to do that. Assurance for other companies will be part of the sales price. Companies aren't going to stop selling properties. They use those proceeds to put into different projects that will, in fact, create more value for them. We will take those properties, the ones that we get, and make them more valuable because we'll focus on that. So, yeah, the surety part of it will definitely undergo a great deal of change. But I think it's for the better. The joint several obligations are never going to go away. Even though there's been a lot of talk about that needing to be the case.
But reality is that the government has no obligation to do that, and it's highly unlikely that they would ever change that. There's no reason to change it. It will have an effect on companies like W&T Offshore, Inc. and others. And we'll just have to figure out different ways to do things.
Jeff Robertson: Excuse me. The question on your reserves, of the 1.8 million BOE of positive revisions, can you provide some color as to which properties contributed there? And was any of that related to performance on the Cox acquisitions versus those properties had originally been booked?
William Williford: Yeah. Go ahead, Blake.
Tracy Krohn: Yeah. Thanks, Tracy. Some of the additional increase in the reserves was based on better performance of some of the Cox assets as well as some of our own assets. We did some optimization projects to further increase and increase the life of our Mobile Bay asset as well. So they added significant value as far as from a reserve standpoint.
Jeff Robertson: Yeah. Jeff, I'll add to that a little bit. I mean, we're still working some of these properties and finding different things that we can do with not only with the facilities themselves. Young Mr. Cox left them in terrible shape when we acquired them. They weren't doing the maintenance. They weren't maintaining properties in what we would have considered to be a safe manner. So we've had to spend a bit more money to bring them up to our standards. And I think that's certainly affected some of the cash flow near term. But long term, I have a lot of high expectations of these properties, and we're getting there.
Production at West Delta 73 and Main Pass 108, they're all coming up as we speak.
Jeff Robertson: Thanks, Tracy.
Operator: As there are no more questions, this concludes the question and answer session. I'd like to turn the conference back over to Tracy Krohn, Chairman and CEO, for any closing remarks.
Tracy Krohn: Thanks, operator. Again, we celebrated twenty years as an NYSE-listed company yesterday. I'm expecting another twenty years. I would certainly like to be around for that. So with that, just all of our shareholders watch what happens next. It's going to be fun. It's going to be exciting. And it's going to be profitable. Thanks so much.
Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.